G20-Germany-Hamburg-2017

Building resilience
Q
What are the prospects for strong,
sustainable balanced growth with the
economies of the United States, Europe,
Japan and Canada all growing
steadily again?
A For the first time in quite a while, we
have synchronised growth among the G7
countries, which should enable a more
stabilising effect on the global economy.
It’s not as strong as it could be, it is not
as strong as it should be, but it is strong,
sustainable steady growth and threequarters
per cent more than last year. I
would bet that the G7 will be at least a full
percentage point higher than last year.
Q Is this time to move towards monetary
tightening and fiscal consolidation to
control escalating deficits and debt?
A It is beyond time. All the countries
have passed up opportunities. They must
undertake actions to relax on the regulatory
and structural impediment sides, which
would provide them room to tighten their
fiscal and monetary policies.
Q What contributions and risks to global
growth come from the big emerging
economies?
A The biggest risk that both China and
India provide is a stop-go pattern of
growth – not negative or zero growth,
but getting off to a slow start. Both face
strong challenges domestically in terms of
regulatory freedom, market competition
and the ability of firms to acquire money
based on a profit outlook rather than a
state-controlled distribution sector.
Q What structural reforms are needed to
revive productivity, especially given ageing
populations and the digital revolution?
A Labour market reforms top the list. In
the United States, labour market reforms
are needed as well as regulatory reform
from the central government. In Europe,
Leaders must commit to
the regulatory structural
reforms that will allow
their workers a chance to
earn a better wage
labour markets should be the numberone
priority because of rigidities in wage
flexibility, job change flexibility and
mobility among countries.
France’s Emmanuel Macron is taking
an interesting approach but the details
so far are lacking, so we are unable to
judge whether it will get through the
legislature, what the popular reaction will
be and how detailed the reforms will be.
In the United Kingdom, uncertainties
surrounding Brexit were large before
the recent election. I don’t think the
European Union will be any more flexible
than it would have been before the
election. France and Germany still want
to extract a high penalty from the UK.
Stock markets in continental Europe
have experienced weaknesses that
suggests those markets are more worried
about that penalty than they are about
the UK’s departure.
Q Do you expect US President Donald
Trump to come together with his colleagues
at Hamburg to produce a credible action
plan for growth that includes the standard
language about open markets?
A That’s a very interesting question,
and very difficult to answer. So long
as the discussions focus on regulatory
reform and freeing domestic economies,
Trump will be a strong supporter. To the
extent the leaders talk about bilateral
trade, he will be a strong supporter. He
seems to be exhibiting a continued strong
uncomfortableness with multilateral
trade. To the extent that the communiqué
looks towards a trans-Pacific or
multilateral trading approach, he will not
be supportive.
Q How can the G20 leaders boost
growth and respond to their publics’
dissatisfaction?
A There is increasing discomfort
with globalisation. We have not done
a good job selling the benefits to our
populations. There’s an imbalance
between validating and affirming the
gross benefits and what people see as the
short- and medium-term costs. Leaders
need to be cautious in how they talk
about globalisation. They need to sell it
in terms of what it means to workers. We
haven’t focused on that.
Also, leaders must commit themselves
to the regulatory structural reforms that
will allow their workers a chance to earn
a better wage and move to jobs where
they have growth opportunities instead
of being stuck in ageing industries. It
is interesting to see Trump talk about
apprenticeship training, drawing on the
German model. Some of us have talked
about this for a long time. Not everyone
should go to college. There are lots of
skilled parts of the labour market that
provide wonderful opportunities for
long-term employment growth and good
income. G20 leaders could also talk about
labour market training at the entry level
– we are not good at retraining senior
middle-aged workers for new fields. But
we need to do a better job of training
high school and junior college leavers so
they have usable skills for today’s labour
market to find good-paying jobs. G20
48 G20 Germany: The Hamburg Summit • July 2017 G7G20.com